18 May 2018

Blockchain Will Help ‘Drive This Next Industrial Revolution,’ Wall Street Bull Predicts; One Of 5 Key Technologies, Along With Automation, Artificial Intelligence, The Internet-Of-Things, And Robotics; And, It Has Enormous Implications For Warfare, & Espionage

Digital currency and Bitcoin may get sucking out most of the oxygen in the room; but, it is the blockchain technology that is going to fundamentally change the economic, and perhaps military landscape when all is said and done. “At this point, blockchain may still be l considered an emerging technology,” Stephanie Landsman wrote on CNBC’s webisite, May, 13, 2018; “but, Federated Investors Portfolio Manager, Steve Chiavarone, is folding the electronic system, which records crypto-currency transactions into his stock market forecasts,” she noted.

Blockchain “is going to be one of five key technologies — along with automation, robotics, artificial intelligence (AI), and the Internet-of-Things (IoT), that drive this next industrial revolution,” Mr. Chiavarone told CNBC’s Trading Nation last Friday. He “see’s FANG stocks (FaceBook, Amazon, Netflix, & Google [Alphabet]), as ultimately reaping the benefits from blockchain’s processing power — as well as areas from healthcare, to financials,” Ms. Landsman wrote. One glaring omission from the FANG stocks is of course, Nvidia, which is in a real sweet spot when it comes to reaping the benefits of blockchain technology. Mr Chiavarone also did not mention the military; but clearly, blockchain technology could also have a profound impact on the future of warfare.

How Important Is Blockchain? 

Silicon Valley visionary Balaji S. Srinivasan sat down last fall, for a lengthy interview with the Wall Street Journal’s Tunku Varadarajan about the digital currency, bitcoin; and, the block-chain technology platform it runs on. Mr. Varadarajan’s weekend (Sept. 23/24, 2017) Op-Ed in the Wall Street Journal provides a summary of that discussion; and, helps explain the justification for bitcoin’s ferocious surge in price; and, why block-chain technology may be the most important invention/discovery since the invention of the Internet. I refer you to this weekend’s Wall Street Journal for the entire article. 

According to his own web-post, Balaji Srinivasan, now 37 yrs. old, received a BS., MS., and Ph.D. in Electrical Engineerring, and an MS. in Chemical Engineering from Stanford University, where he also occasionally teaches a class, in person, and online. He is the CEO of 21.co, and prior to undertaking this endeavor, he was a Board Partner at Andreessen Horowitz, a private, venture capital firm based in Menlo Park, California. Mr. [Dr.] Srinivasan was awarded the Wall Street Journal Innovation Award for Medicine when he was the Co-Founder and CTO of Founders Fund-backed Counsyl.

Mr. Varadarajan is a Fellow in Journalism at Stanford University’s Hoover Institution.

Mr. Varadarajan writes that “Mr. [Dr.] Srinivasan “has called the stateless digital currency, bitcoin,” the most important technology of the decade.” When asked to explain this assertion, Dr. Srinivasan said “I’d update that today, to say that the block-chain — which is not just bitcoin — is the most important invention since the Internet. I’m not sure that’s [current] consensus in Silicon Valley; but, it’s getting there,” he tells Mr. Varadarajan. “The block-chain,” he adds, “is the Internet of money — with similar decentralizing and liberating potential.”

When asked by Mr. Varadarajan to explain “block-chain,” Dr. Srinivasan remarked that “the short version,” is that “bitcoin is a way to have programmable security. The block-chain is the data structure that records the transfer of scare objects.”

Asked to explain the longer version, Dr. Srinivasan remarked that “we can understand bitcoin and block-chain in four steps.” Step One, is “Cash,” he said. “When A gives a dollar to B, he’s [they are] transferring a physical object. B has it, and A no longer does. There’s implicit scarcity in the physical world.”

“Step 2 supposes that we treat the serial numbers on those Federal Reserve bills as a form of “naive digital cash,” Mr. Varadarajan wrote. “Then A emails those numbers to B. Now, B has a copy. But. A still has a copy!” So if those serial numbers were treated as cash, A can “double-spend” the numbers by sending them to another party, C. This, Mr. [Dr.] Srinivasan says, “is the fundamental issue with digital cash: “The double-spend problem. How do we introduce scarcity into the digital system?”

“The way we resolved this problem before bitcoin,” Mr. Srinivasan explained in his third step [Step 3], “was through the use of centralized institutions called banks. Whenever you use PayPal or a similar technology to send money from A to B digitally, the bank is trusted to debit A, and credit B.” This, he told Mr. Varadarajan, “is how “scarcity” is introduced into a digital system; but, it is “inelegant from a computer science perspective, to have a central, trusted node in any networking topology,” “a word in my [Mr. Varadarajan’s] dictionary defines, in this context, as being the way in which constituent parts are interrelated or arranged.”

But, Dr. Srinivasan “doesn’t really care for this arrangement,” Mr. Varadarajan wrote. “There are downsides to implicitly trusting banks, as the 2008 financial crisis showed,” Dr. Srinivasan said. “So, rather than require a bank to approve the transactions, “Bitcoin figured out how to split this across many different transaction approvers, called ‘miners.” They “compete to approve transactions and integrate them into the so-called block-chain. Every time they integrate a new block of transactions into the block-chain, they receive a ‘block reward,’ and are entitled to print digital currency.” “The key point he says is, that any computer could, in theory, approve transactions, and no single computer could block transactions,” Mr. Varadarajan wrote.

Mr. [Dr.] Srinivasan conceded to Mr. Varadarajan that it’s “a big claim” to say the block-chain is the most consequential technology since the [birth] of the Internet,” Mr. Varadarajan noted. “The Internet is programmable information. The block-chain is programmable scarcity.” He added: “All of these previously disparate things — from physical mail to television, to music, to telephony — basically got turned into packets of information and got remixed by the Internet. Plus things we that we normally didn’t even think of as information — your FitBit, your steps, your FaceBook settings — became programmable.” It’s fair to say, he continues, “that the Internet, and all things downstream — search engines, social networks, ride sharing, and so on — have basically been the technological story of the last 25 years.”

“The block-chain is the next phase,“Mr. [Dr.] Srinivasan “says with some zest,” Mr. Varadarajan wrote. “With the block-chain, everything that was scarce now becomes programmable. That means cash, commodities, currencies, stocks, bonds — everything in finance is going to be transformed; and, aspects of finance baked into everything else.” Later in the conversation, Dr. Srinivasan “offers a slogan for the new age: “If you deal with information, you need the Internet. If you deal with money, you need to deal with block-chains.”

“The block-chain, Mr. [Dr.] Srinivasan continues, “is a religion that works. Here’s why: If you take 10,000 people and put them in a circle and close their eyes hard and say, ‘Let this thing have value,’ and they all value it, they’ve suddenly got a price for it.” “They will exchange things of economic value among themselves, and the external world can interact with them,” Mr. Varadarajan wrote. “In the same way that once you’ve got enough people, you’ve got a nation, you’ve also got a currency. So, belief is actually something you can actually materialize into currency,” Mr. [Dr.] Srinivasan said.

When asked about the government of China’s recent crackdown on bitcoin and the potential that this could be the proverbial canary in the digital currency ‘coal mine,’ Mr. [Dr.] Srinivasan remarked that “the government of China is actually run by engineers. Hu Jintao was an engineer, as is Xi Jingping. One of the things they do in China is they actually give seats in government to folks who are successful in technology.”

So, what does China’s recent crackdown on Bitcoin actually mean?,” Mr. Varadarajan asked Mr. [Dr.] Srinivasan. “Mr. [Dr.] Srinivasan believes that Beijing is doing something similar to what it did when it deployed the so-called Great Firewall in the early 2000s. It wanted the Internet; but, it wanted a controlled Internet.” “It now has a vigorous and competitive Internet economy, with Alibaba, Tencent, and Biadiu, “but, it also takes measures that Western societies would not, in terms of explicit Internet censorship.”

“If the Chinese government wants the benefits of the block-chain, “without the decentralization of bitcoin,” Mr. [Dr.] Srinivasan said, “we might see a Great Block-Chain of China’ — perhaps a ‘China-Coin,’ issued by the Peoples Bank of China.” It may seem too early for “something of that magnitude” to happen, Mr. [Dr.] Srinivasan told Mr. Varadarajan. “But, sometimes, the future happens more quickly than we expect.” An interesting question he adds, Mr. Varadarajan wrote, “is whether this ‘China-Coin,’ would be directly pegged to the renminbi, as seems most likely; or, whether it would be freely floating, like the bitcoin.”

Mr. Varadarajan writes that Mr. [Dr.] Srinivasan “is confident that the protocols that sustain a decentralized, global digital currency will weather a crisis of this sort (ChinaCoin).” “This is the kind of test these protocols were built for. If they survive, which I [Dr. Srinivasan] think they will, then we’ve proven something amazing,” Dr. Srinivasan told Mr. Vardarajan. “We’ll have proven,” ‘he says with a smile,’ “that there’s now a new kind of digital asset — which even a technically competent and motivated government cannot seize.”

‘Disruptive Blockchain Technology Is Coming To A Gray-Zone War Near You’

Blockchain technology isn’t just going to be a disruptive economic force, it may also impact the future of warfare, in ways we can’t yet understand and appreciate. Jahara Matisek wrote in the March 14, 2018 edition of The National Interest that “emerging blockchain technology will offer enumerable defensive and offensive tools for military and intelligence operations in the 21st century. Whoever masters, and weaponizes blockchain first, will determine their penultimate power and influence over others.” 

I refer you to Mr. Matisek’s article for his full discussion about blockchain’s potential impact on the battlefield of the future; but, information operations, ‘fake news,’ and carefully placed propaganda/data manipulation, and/or deliberate denial and deception, along with offensive and defensive cyber operations are domains where blockchain could play a disruptive and pivotal role. In the field of intelligence, government entities will be able to covertly pay their operatives in foreign countries; and, allow terrorist entities, cyber mafia’s, cyber militia’s, etc. to also do the same.

And, whoever gets their the fastest, with the best in the blockchain domain — could establish and perhaps enforce — a ‘Monroe Doctrine In Cyberspace,’ Mr. Matisek contends. 

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